Mortgage Options During A Separation

When you’re navigating a separation, it’s important to understand your mortgage options. This guide outlines clear paths—whether buying out, selling, or refinancing—so you can move forward with confidence.

Navigating Your Mortgage During a Separation

Separation or divorce brings emotional and financial complexities—especially when it comes to the home you once shared. If you and your former partner own a property together, understanding your mortgage options early can help you make informed decisions and protect your financial well-being.

Step 1: Review Your Current Mortgage

Start by gathering key details about your mortgage:

What is the remaining mortgage balance?
What is the current interest rate and time left in the term?
Who is listed on the title and on the mortgage?
Can either person afford the mortgage on their own?

Having a clear picture of your current situation is the first step in determining the

best path forward.

Step 2: Understanding Your Options

There are a few common directions couples take when navigating homeownership after a separation:

1. One Partner Buys Out the Other

If one person wants to remain in the home, a Spousal Buyout Program may be an option. This program allows the home to be refinanced up to 95% of the first $500,000 in value and 10% on the remainder up to 1.5 million. This is more than the standard 80% under typical refinance rules.

To qualify:

A legal separation agreement is required.
The person staying must qualify for the mortgage on their own.
Only joint debts can be included in the new mortgage—personal debts must be handled separately.

2. Selling The Home

For some, selling the property and dividing the proceeds is the cleanest option. It allows both parties to move forward independently.

Key considerations:

Agree in writing on how the proceeds will be divided.

Ensure all property-related debts are paid from the sale.

Understand the timing and market conditions before listing.

3. Temporary Co-Ownership

Some couples choose to continue co-owning the home short-term, often for stability (e.g., children's schooling or market timing). This requires a clear legal agreement outlining:

Who is responsible for mortgage payments and other expenses
The timeline for continued co-ownership
A plan for future sale or title transfer

Note: As long as both names remain on the mortgage, both parties are fully responsible—this could limit your ability to get a new mortgage elsewhere.

4. Mortgage Assumptions (Where Available)

In limited cases, one spouse may assume the existing mortgage without a full refinance. This depends on the lender's policies and whether the assuming party qualifies. Not all lenders allow this, so it’s worth investigating early on.

Additional Considerations

Protecting Your Credit

During separation, joint financial obligations can quickly become complicated. Missed payments—by either party—can affect both credit scores if names remain on shared accounts.

Steps to protect yourself:

• Work to have your name removed from debts you’re no longer responsible for.

• Ensure joint debts are paid in full or refinanced into individual names.

• Monitor your credit reports regularly.

Professionals Who Can Help

Separation often requires input from multiple professionals:

• Mortgage Broker: To explore financing options, including spousal buyouts or qualifying on your own

• Lawyer: To create a formal separation agreement and handle title transfers

• Financial Advisor: To assist with budgeting, debt repayment, and future planning

Mortgage Qualification Notes

Qualifying for a new mortgage after separation depends on many factors:

• Income source and stability (e.g., employment, child support, maternity leave, pensions)

• Credit history

• Existing debts

• Down payment source and amount

Different lenders have different policies. A broker can help find solutions that work for your unique circumstances—whether you're rebuilding independently or buying out a former partner.